All told, the Republican measure would add $300 billion to next year’s budget deficit, the JCT said.
A competing Democratic proposal to extend the Bush tax cuts only on income under $250,000 would increase the deficit by about $223 billion next year. Democrats would devote an additional $27 billion to extending a variety of other middle-class tax cuts, including a credit for college tuition and an expanded credit for the working poor, bringing the total cost of the measure to about $250 billion.
The Bush tax cuts, enacted in 2001 and 2003, are set to expire Dec. 31. Democrats have threatened to let them all go unless Republicans abandon their push to preserve the cuts for taxpayers in the top brackets. With the release of the new cost estimates, Sen. Orrin Hatch (R-Utah) questioned the wisdom of that position.
“The American people deserve better than to have the President and his allies threaten to melt down our economy for what amounts to [a few] days of federal spending,” said Hatch, the senior Republican on the Senate Finance Committee. “With 41 consecutive months of unemployment over 8 percent, it just makes sense to extend this tax policy for a year so we can enact meaningful, pro-growth tax reform.”
Democrats countered that the one-year savings from ending the cuts for the rich may not be much, but that those savings would grow over time, bringing more than $800 billion into the U.S. Treasury by the end of the decade.
“If we decouple the tax cuts for those earning above $250,000 they will be gone for good. Over ten years, that will reduce the deficit by $800 billion compared to what Republicans want to do,” said Sen. Charles Schumer (D-N.Y.).
The Senate plans to consider the tax measures next week; neither is expected to pass. The debate is designed instead to let each party air its position on taxes heading into the November elections.
Neither party is calling for a permanent extension of the Bush tax cuts. Instead, both sides are seeking a one-year extension that would give lawmakers more time to enact a complete overhaul of the Byzantine federal tax code in 2013.